Profit and loss accounts of private telecom companies will now be open for scrutiny by the Comptroller and Auditor General (CAG) under the revenue-sharing agreement that the firms have with the Government.
The Supreme Court (SC) on Thursday held that private telecom firms using any scarce natural wealth like spectrum would be accountable to the central auditor.
A bench of Justices KS Radhakrishnan and Vikramajit Sen said: “CAG’s examination of the accounts of the service providers in a revenue-sharing contract is extremely important to ascertain whether there is an unlawful gain to the service provider and an unlawful loss to the Union of India, because the revenue generated out of that has to be credited to the Consolidated Fund of India.”
The judgement by the court may have far-reaching significance as any private firm which uses a natural resource such as electricity, gas, land, etc and enters into a revenue-sharing contract with the Government will now be bound to provide details of its account books to the CAG. The SC held: “When the nation’s wealth, like spectrum, is being dealt with, either by the Union, States or its instrumentalities or even private parties like service providers, they are accountable to the people and to the Parliament.”
The private telecom firms agreed in the SC that the Department of Telecom could call for records from the firms under the licence agreement, but opposed the CAG audit as such a power would extend only on accounts of the Union, States, Government companies or corporations. However, dismissing this argument, the bench held: “The CAG is entitled to seek the records in terms of Rule 3 of TRAI Rules 2002 read with Clause 22 of the licence Agreement.”
It explained: “CAG, in that process, is not actually auditing the accounts of the Unified Access Service (UAS) service providers as such, but examining all the receipts to ascertain whether the Union is getting its due share by way of license fee and spectrum charges, which it is legitimately entitled to, by way of revenue sharing.”
The court underlined the need for such audit hinting at the 2G spectrum scam when private telecom firms had connived with the Executive to further their business interests. The bench observed: “Instances are not rare where even the Executive, at times, is hand in glove with license holders, who deal with the natural resources, hence, the necessity of proper Parliamentary control over the resources.”
Moreover, the Bench observed that spectrum being a natural resource, which belongs to the people, “people of this country through Parliament should know how its natural resources have been dealt with by the Union, States or its instrumentalities or even by UAS license holders.”
The SC went on to examine the power of CAG derived under Article 149 of the Constitution which conferred it with power to audit all receipts, which makes it part of the “basic feature” of the Constitution. And to ascertain whether the Union was getting its legitimate share by way of “revenue sharing” and to this end the firms will be required to provide all documents required by the central auditor, the court said.